Why Should My Condo Complex Become HUD-Approved?

I have heard this several times in the past couple of weeks and will answer it here as it pertains primarily to my home state of Connecticut. Although, this information can be used in many other states as well.

The majority of the condominiums in my neck of the woods are in the $100,000 - $250,000 price range. The buyers in this price range are typically first-time buyers and retirement-age buyers. Let's take them individually.

First-time buyers have only a couple of loan options to chooose from that allow for low-money down and no-money down. In Connecticut, they are FHA (3.5% down), CHFA (0% down) and USDA RD (0% down). VA loans are also available but I wouldn't categorize them as being primarily for first-time buyers. What all three of these loan programs have in common is that they all on run on HUD's approved condominium list.

According to recent changes, these three loan programs cannot be used to finance any unit that is in a condo complex that is not HUD-approved. Until November 2009, FHA and CHFA allowed for "spot approvals". Spot approvals were used to allow FHA and CHFA financing in complexes that were not HUD-approved. The individual units could be approved for financing even if the complex was not.

Now that spot approvals are no longer allowed, complexes that are not HUD-approved rule out first-time buyers who are looking to use FHA, CHFA or USDA financing. This leaves only Conventional loan products and niche-lender financing products. Conventional loans (loans that are ultimately purchased by Fannie Mae or Freddie Mac) require a minimum of a 10% down payment. How many first-time buyers have $10,000 - $25,000 to put down on their first home? When you add in closing costs, we are talking about a minority of first-time buyers.

By not being HUD-approved, the complex is ruling out the majority of first-time buyers. So what, right? Wrong. This could lead to increased marketing times as buyers are tougher to come by. This could also lead to a decrease in the prices of the units in the complex because of the law of supply and demand.

Retirement-age buyers may not be affected in the same way as first-time buyers. Many of these buyers sell their homes to move into a condo for more carefree living, where they don't have to maintain the property's exterior and grounds. In selling their homes, they may have money to purchase in the complex with large down payments or without having to obtain financing at all.

Where it does affect them is if they eventually need to apply for a Reverse Mortgage. The only player for reverse mortgages is FHA. If the condo complex is not on HUD's list, an FHA reverse mortgage cannot be obtained in the complex.

Refinancing with FHA loans is also impossible if the complex is not HUD-approved aside from an FHA-to-FHA Streamline refinance. However, if the unit-owner does not have an FHA loan now or cannot qualify for a Streamline transaction, the loan cannot be done.

There are literally dozens of condo complexes in Enfield, Manchester, South Windsor and Vernon Connecticut that are not FHA-approved but can be. Because FHA allowed "spot approvals" there was no reason previously to become FHA-approved. Now it is imperative as FHA and CHFA loans are in such a high demand.

Many complexes in CT are already HUD-approved. However, if the complex was approved prior to October 1, 2008, they need to get recertified on or before December 7, 2010. As the year progresses, and more and more complexes become aware of the need to get recertified, the processing centers will get bogged down with requests and delays will result.

I offer a service to help complexes to become HUD-approved and to maintain their approvals. I coordinate with the management companies and/or the homeowner's associations to compile the paperwork that HUD needs and oversee the approval process. In addition, I maintain a database of approved complexes and monitor when their approvals expire. This way I can guarantee that their HUD-approvals do not lapse.

If you are a unit owner, seller or are looking to buy in a complex with an FHA, CHFA or USDA loan, please contact me to make sure that your complex is approved. If it is not, I can assist in your complex's approval and to maintain its approval.

Don't forget that we are experts in no-money down and low-money down Government mortgage loan programs. You can email me at eric@righttracfg.com or call me at 860-647-7701 x13. I will be happy to answer any of your questions.

When it comes to No Money Down Financing, we are the Experts!

Eric Boucher
Government Loan Specialist
Right Trac Financial Group
860-647-7701 x13 Office
860-324-3324 Cell
eric@righttracfg.com